Michael Hosking, chief risk officer for Gen Re International P&C, reviews the key ERM developments of 2021 and his outlook for 2022
What was the most positive enterprise risk management (ERM) development of 2021?
There are four things I spend my time on and they all begin with C. They are cyber, climate, culture and conduct. All of these issues are going through a similar level of evolution, and in some cases, revolution.
Cyber risk has definitely been a focus in 2021 on both the underwriting exposure and operational side. Climate risk has been an area of focus for most CROs, with almost all accepting the difficulty of the topic in assessing future loss costs for climate-exposed business.
On the conduct and culture side of things, clarity of wordings and simplicity of policy terms continues to be an important area, as well as the application of enhanced ESG frameworks.
What was the biggest ERM disappointment of 2021?
The pandemic might be an example where the scenario assessment of the impact to property and casualty (P&C) portfolios was not adequately foreseen.
Did we as an industry consider how a modern environment would react to a pandemic event?
In hindsight, it seems obvious governments would take mitigating actions to close off travel and the economy. Historically, insurers considered a pandemic to largely impact life and health portfolios in terms of insurance losses, whereas it became more relevant to P&C portfolios than expected.
The criticism we want to avoid [in the risk function] is that we can look behind us and say what we did wrong, rather than be forward-looking and focus on what the important issues will likely be in the future.
What emerging risks are you most concerned about?
Inflation is a very relevant risk going into next year, to ensure insurance pricing is adequate for the potentially new levels of loss costs.
Inflation is not an emerging risk, but one that need to be considered in various areas, such as inflationary shocks within a capital scenario perspective or looking at the inflationary impacts of reserving deterioration or under-pricing.
What is your working pattern in the new normal?
We are trialling a hybrid working pattern currently in various locations, with the important factor being flexibility and constant communication to make sure it is working for all functions, individuals and stakeholders. We target at least three days a week in the office with 'anchor days', where we try to have everyone in.
If you could have one wish for 2022, what would it be?
Hopefully, this virus goes away, or rather we learn to live with it as best as possible and that becomes a balance globally. It would be great to see the global economy moving to a more stable state. Coming out of the pandemic, I would also hope that everyone is going to open their eyes and realise the opportunities available. Going through the lockdown period, we realise how some of those opportunities were taken away from us and we will therefore appreciate them a little bit more.